Train fire restarts safety debate as US reviews Keystone XL proposal

The derailment and fire that led to the evacuation of a North Dakota town has renewed the debate over whether it’s safer to ship oil by rail or pipeline as the US completes a review of the Keystone XL project.

The derailment
and fire that led to the evacuation of a North Dakota town has
renewed the debate over whether its safer to ship oil by
rail or pipeline as the US completes a review of the Keystone
XL project.

Any time
there is an incident, you have heightened talk and scrutiny on
oil transportation, Brigham McCown, a former director of
the Pipeline and Hazardous Materials Safety Administration,
said yesterday in an interview. It will add to the
conversation.

Public safety
officials urged more than 2,000 North Dakota residents to flee
fumes from the fire that engulfed BNSF Railway Co. cars
carrying oil after a collision Dec. 30 with another train about
25 miles (40 kilometers) west of Fargo. BNSF is owned by
Berkshire Hathaway Inc. of Omaha. The evacuation was lifted
yesterday at 3 p.m. local time after health officials declared
the air safe.

While climate
change has been the focus of the fight over TransCanada
Corp.s proposed Keystone XL pipeline from Canada to the
US Gulf Coast, a subset in the debate has been the relative
safety of pipes vs. trains. The US State Department, reviewing
the $5.4 billion project because it would cross the
US border, is weighing whether the pipeline would be in the
national interest.

Keystone would
allow about 100,000 barrels a day of crude from the Bakken
formation in Montana and North Dakota onto the pipeline through
a link in Baker, Montana.

Increasing scrutiny

Bakken
oil is going to come under increasing scrutiny, as a
result of the rail explosion, said Robert Schulz, a professor
at the University of Calgarys Haskayne School of
Business. You may see additional thoughts of,
Lets approve Keystone because its going to be
safer.

The North
Dakota accident is the fourth major North American derailment
in six months by trains transporting crude. Record volumes of
oil are moving by rail as production from North Dakota and
Texas have pushed US output to the most since 1988 and pipeline
capacity has failed to keep up.

I think
this -- seemingly yet another rail incident -- will add to the
clamor for more regulation of shipping oil by rail, Tony
Hatch, an independent rail analyst based in New York, said by
e-mail.

Critics of
Keystone have pointed to pipeline spills in Alabama, Michigan
and North Dakota to show that method of transporting oil
carries its own hazards. In September, a Tesoro Corp. pipeline
ruptured and spilled 20,000 barrels of crude in northwest North
Dakota.

Few
incidents

Even with
recent events, McCown, who is now an industry consultant and a
supporter of Keystone, said both trains and pipelines are safe,
with few incidents relative to the amount of crude they
transport. One advantage pipelines have is that they tend to be
in more sparsely populated areas, he said.

Rail
built the West -- rail built most of the towns, he said
by telephone. As a consequence, there are more rail lines
going through more populated areas.

Anthony Swift,
an attorney for the Natural Resources Defense Council, said the
Dec. 30 derailment underscores the need to improve train safety
in the US, regardless of whether Keystone gets built.

Crude by
rail is happening in North Dakota, its not related to
Keystone, Swift said in a telephone interview.
Keystone isnt going to eliminate this crude-by-rail
movement in the US.

The State
Department review of Keystones environmental impact includes
whether the pipeline would lead to more carbon- dioxide emissions. The analysis could be
released in the next few weeks.

President
Barack Obama said in a June speech on climate change that he
wouldnt approve Keystone if it would lead to a
significant increase in carbon-dioxide emissions.

McCown said
rail use would probably increase if Keystone were blocked.
The oil will find its way to market, he said.

Critics of
Keystone argue that oil sands development will stall if the
pipeline, which would have a capacity to carry 830,000 barrels
of crude, is blocked by the administration.

Michael
Whatley, executive vice president of Consumer Energy Alliance,
an industry-backed group that supports Keystone, said more rail
accidents can be expected with the increased use of trains to
carry oil to market.

Trains
need to be a supplement, not a replacement for pipelines,
Whatley said. While both forms of transportation are safe,
we need expanded pipeline infrastructure, he
said.

State
department

A draft
supplemental environmental impact statement
released by the State Department in March included a brief
comparison of the safety of pipelines versus rail.

While
derailments probably would release less oil than a pipeline
rupture, trains have an increased statistical likelihood
of spills, the report said.

The North
Dakota crash is a wake-up call for what increased oil
production in North America is going to mean for US.
communities, said Stephen Kretzmann, executive director of Oil
Change International, a Washington-based group that opposes the
use of more fossil fuels.

Kretzmann said
that while he expects advocates of the Keystone pipeline to use
the train crash as evidence that rail transport is unsafe,
pipelines also pose dangers.

The best
solution is to phase down oil production, Kretzmann
said.

Casselton incident

The latest
incident occurred when a westbound train carrying soybeans
derailed west of Casselton, in eastern North Dakota, just after
2 p.m. local time Dec. 30, said Cecily Fong, a spokeswoman for
the state Emergency Services Department. An eastbound train
carrying oil hit the derailed train, causing the fire, she
said. Nineteen cars carrying crude derailed, said Robert
Sumwalt, a member of the U.S. National Transportation Safety
Board who was dispatched to the scene.

The train
carrying oil originated in Fryburg, North Dakota, and was bound
for Hayti, Missouri, on the Mississippi River, Sumwalt told
reporters in Fargo yesterday. Of the 106 rail-cars, 104 were
carrying oil, he said.

Marquis Energy,
based in Hennepin, Illinois, runs a terminal in Hayti that
unloads crude from railcars and sends it by barge down the
Mississippi, according to the companys website. The
complex handles seven unit trains a week through BNSF, the
website shows.

Railcar
safety

Sumwalt said
investigators hope to retrieve data from event recorders on the
oil trains rear locomotive. The team has also looked at
the last 20 seconds of video taken from a camera on the oil
train, which shows the collision.

The oil tank
cars were DOT-111 models not of a newer design, Sumwalt said.
The safety board has urged the US Pipeline and Hazardous
Materials Safety Administration to issue tougher standards for
such cars to make them more resistant to puncture during
accidents.

The pipeline
agency is reviewing updates to its rules.

Two to three
railcars were still burning yesterday morning and 1,500
residents living within a five-mile radius of Casselton heeded
warnings to evacuate, Tara Morris, a spokeswoman for the Cass
County Sheriffs Office said at a press briefing. One tank
car can hold about 700 barrels of oil, according to the Energy
Information Administration, the Energy Departments
statistical arm.

No injuries to
the train crews were reported, BNSF said in a statement.

We are
thankful there have been no injuries as a result of the
derailment near Casselton, North Dakota, and are terribly sorry
for the inconvenience this derailment has caused residents in
the area, the company said.

Debris
cleared

About 65% of
the 2,400 residents of Casselton left their homes as BNSF crews
cleaned up debris while waiting for fires in two or three rail
cars to burn out, Morris said.

The train
tracks closed after the Dec. 30 derailment are expected to
reopen at 7 a.m. local time tomorrow, Fort Worth, Texas-based
BNSF said in a notice on its website yesterday. The company,
meanwhile, is rerouting trains through other parts of North
Dakota, as well as South Dakota, Montana and Wyoming, according
to the statement.

North Dakota
Governor Jack Dalrymple, a Republican, and US Senator John
Hoeven, a Republican, met with BNSF Railway Chief Executive
Officer Matthew Rose to express concern about the accident and
call for ways to expedite rail-transportation safety, according
to a statement posted on the governors website
yesterday.

We need
to rigorously review which products can be shipped in which
railcars for maximum safety until newer cars come online,
Senator Hoeven said in the statement. We also need to
advance rules for building new tankers with enhanced safety
features.

Continental
Resources Inc., the largest leaseholder in North Dakotas
Bakken shale field, projected slight delays
in shipments for several days from the region due to the fire,
spokesman Warren Henry said in a telephone interview.

Oil produced in
North Dakotas Bakken formation for delivery at
Clearbrook, Minnesota, strengthened 75 cents/bbl to a discount
of $7.50/bbl versus US benchmark West Texas Intermediate crude
at 2:06 p.m. New York time, data compiled by Bloomberg
show.

We expect
companies to use alternative routes for transportation by rail
and do not anticipate the incident to have any short term
impacts on production, Lynn Helms, director of the North
Dakota Department of Mineral Resources, said in a
statement.

Earlier
accidents

In November, a
train carrying oil to the Gulf Coast from North Dakota derailed
in Alabama, touching off fires. A month earlier, residents were
evacuated from a rural area of Alberta after 13 railcars, four
of which were carrying crude, derailed and ignited a blaze.

In July, a
runaway train transporting crude exploded and killed 47 people
in the Quebec town of Lac-Megantic.

The Dec. 30
derailment is likely to flare up the debate on the environmental side of the shale oil
boom, which could result in higher costs for the
industry, JBC Energy GmbH, a Vienna-based energy
consultant, said in an e-mailed report yesterday.

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